4/16/2009 @ 6:45AM

Remy's Risky Business

Remy Cointreau is taking a big gamble on a new global distributor for its posh champagnes and spirits: itself.

The French drinks maker attributed a 41.0% decline in its fourth-quarter revenues–ending March–largely to disentangling itself from its distribution network Maxxium, which took place formally on April 1. Approximately 25.0 million euros ($32.9 million) of lower sales were due to the company selling less to Maxxium ahead of the changeover, and 25.0 million euros ($32.9 million) due to having to buy back remaining stocks held by Maxxium at the end of that period.

From now on, Remy Cointreau will follow the strategy of larger drinks maker Pernod Ricard and act as its own distributor. The company reckons that in the current environment having more flexibility and the ability to control sales directly is the right strategy.

Not everyone agrees with that. “Its very risky,” said Fortis bank analyst Severine Ble. She argued that large players like Pernod Ricard had the necessary muscle, in terms of experience, brand name and volumes, to pursue a distribution strategy. It would far more challenging for a firm like Remy Cointreau, which is far smaller and has six brands to its name, to do the same.

While Pernod Ricard and
Diageo
have cheaper brands like Jacobs Creek and Guinness to fall back on in the downturn, Remy is a pure-play premium producer, peddling the likes of Piper-Heidsieck champagne. Remy attributed the 30.0 million euros ($39.5 million) of revenue declines in the fourth quarter to destocking by clients, especially in the United States and Russia.

The company said that full year revenues fell 11.6%. By contrast, Pernod is expecting a double digit rise in profits for the year ending in June, while Diageo is sticking to its expectations of 9.0% annual profit growth.